Keeping up with political news concerning the White House could almost qualify as its own profession, especially in the past month.
As we are inundated with headlines about government shutdowns and porn stars, there was one major policy development which recently captured my attention.
A couple weeks ago, President Donald Trump approved a series of safeguard tariffs for solar cells and modules, as well as washing machines. According to the press release from the United States Trade Representative, the washing machine tariffs will last for three years.
In the first year, the first 1.2 million imported finished washers will carry an additional tax of 20 percent, and all washers over the 1.2 million, will bar a 50 percent tax. For the solar cells, the new tariffs will last for four years, with all modules and cells bearing a 30 percent tax in the first year. For both the washers and solar cells, the tariffs will decrease by a few percentage points each year as well.
It is also interesting to note these are not the first tariffs the government has placed on these particular imports. According to Chad Brown at the Peterson Institute for International Economics, we have previously had a few country-specific tariffs on solar cells and washers. These duties were aimed countries such as China, Taiwan and South Korea. However, these new tariffs would apply to all countries.
As with most protectionist measures, these tariffs were proposed as a way to help domestic producers by shielding them from foreign competition. Although Trump made plenty of noise on the campaign trail about taking up more protectionist trade policies, this is really his first major step in this direction. So, the big question is, what does this mean for the U.S. moving forward?
For different sectors of the American economy, the answer to this question will vary. There are some domestic manufacturers who are praising the tariffs.
According to Richard Gonzales for NPR, companies such as SolarWorld Americas Inc. are glad to see the policy put into place, because as solar panel manufacturers, they have to compete with the importation of foreign panels, which are often cheaper.
This stands in contrast with both the installers of solar panels, as well as American consumers at large. They will have to deal with the fact all solar panels will now be more expensive. This is to say nothing of the prices for washing machines, which will now likely increase as well. In fact, per a news report by Thomas Franck for CNBC, LG Electronics is already planning on hiking prices for their washing machines here in the U.S.
This gets to the central problem with implementing tariffs, such as this new series put forth by the Trump Administration. To use an old phrase, we are basically “cutting off our nose to spite our face.” It is true, some small sectors of our economy could possibly benefit from the reduced foreign competition. The problem is we, the consumers, end up being the ones to pay for these tariffs through increased prices.
What so many people misunderstand about international trade is it is not about competition, but rather cooperation. American consumers can purchase these imports at lower prices, which frees up more of our disposable income. We can then concentrate on the industries and activities in which we excel, and can export those goods and services to foreign countries.
Trying to “win” at international trade is a fruitless exercise because one ends up pursuing policies such as these new tariffs, which often do more harm than good. It would have been better for all of us if the Trump Administration had simply left this well enough alone.